A customer is assisted by a salesperson at a shop selling electric smoking products in Beiijng on May 25, 2009 designed by Hon Lik, the inventor of the electric cigarette. Also known as an 'e-cigarette', the battery-powered device is designed as an alternative to cigarettes, cigars and pipes, and provides inhaled doses of nicotine by delivering a vaporized propylene glycol/nicotine solution, while also providing the physical sensation and flavors similar to inhaled tobacco smoke. With 350 million tobacco smokers nationwide, China will join the world in observing World No Tobacco Day on May 31. AFP PHOTO/Frederic J. BROWN (Photo credit should read FREDERIC J. BROWN/AFP/Getty Images)

Business

Big tobacco stubs out e-cigarette competitors

The tax itself is not what bothers the e-cigarette activists. “It’s insignificant monetarily,” Godshall said. But through the tax, the bill would group e-cigarettes in with other tobacco products, which are heavily regulated at the wholesale and retail levels. As a result, a host of new license restrictions would come down on anyone trying to sell or buy e-cigarettes and related products in Oklahoma.

Under the bill, any dealer of vapor products must obtain a license, carrying an annual fee of $250, and agree to purchase only from suppliers who hold wholesale tobacco licenses.

The wholesale license has its own fee but, more significantly,requires applicants to put up a $25,000 bond, according to Ragan. Because his VaporKings stores import their products from China, the legislation would require him to establish his own wholesale business just to legally supply his own retail businesses.

Since VaporKings has been around for four years and has expanded to multiple locations, Ragan says he has the capital to put up his own $25,000 to get the wholesale license if he needs to. But anyone less well capitalized or trying to enter the market fresh would face a high barrier.

Small e-cigarette businesses in the state that can’t put up the cash for a wholesale license would be forced to buy from existing wholesalers, because the bill reclassifies vapor products as tobacco. As a result, the types of products they can put on their shelves could be severely limited.

“If wholesalers don’t cough up reselling the type of product that we carry at the smaller shops … the only thing that would be available at the wholesale level would be [Reynolds’] product,” Ragan said.